The Benefits Of Working With An ‘Ensemble Practice’

Contributed by: Josh Bitel, CFP®

Financial planning practices come in all shapes and sizes, but perhaps the two most common arrangements are solo practices and ensemble practices. Solo practices are normally led by a single advisor who calls the shots, while ensemble practices are team-oriented firms, all working toward a common goal. The Center identifies with the latter.

An ensemble practice is structured with multiple advisors under the same roof. This allows for constant sharing of ideas, best practices, strategies, and even sharing of resources. The Center has a 2 hour meeting every Monday for just this purpose. Our planners at The Center, all with unique expertise, get together to eat lunch and share client cases, tough questions, interesting reading pieces, and maybe a few jokes here and there. This is all possible because we are all working collaboratively toward a shared vision, as outlined in the Vision 2030 document our entire team had a hand in creating.

The Center, as with many ensemble practices, leverages the power of teams. We have team members who are specialists in such areas as insurance, divorce planning, tax planning, retirement planning, and many more. So if an advisor is met with a tough client case involving long-term care, for example, he or she can seek out help from a team member with expertise in this area instantly.

An often overlooked advantage for clients choosing to work with an ensemble practice such as The Center is the foundation for internal succession planning. It is often said that as an advisor ages, so do their clients. This begs the questions who will take care of me when my advisor retires? And from the advisors end, who will take care of my legacy once I’ve moved on? With a practice like ours, there is an internal succession plan in place for many years before a planner decides to retire. Often, clients are transitioned to an advisor who has been working under the tutelage of the retiring advisor.

As with anything, you must weigh the pros and cons of working with an advisor under their practice’s arrangement. In the end, it is all about finding the right person to help you reach your goals and feel comfortable along the way. At The Center, we have found that working in a team-based environment toward a shared vision helps us serve our clients the best way we can.

A Top Issue Financial Planning Clients Are Facing Due To The Pandemic

Contributed by: Sandra Adams, CFP®

We are approaching a year of living in what many are calling the “new normal”.  While the future remains unknown, last year provided us with the opportunity to reflect on what is most important in our lives.

When the health of ourselves and the ones we love is threatened, it sparks the reevaluation of our top priorities. During the Covid-19 pandemic, advisors at The Center found that clients are most concerned about the wellbeing of their families instead of short-term market volatility. Additionally, we have had more conversations about charitable giving and the causes clients want to support, especially now when so many people are in need.

I have had many conversations with clients in 2020 that reminded me of a book by Simon Sinek called “What is Your Why?” The book is about helping people find clarity, meaning, and fulfillment to find their purpose. Helping clients find their purpose is woven into the fabric of The Center. It has never been more evident and meaningful than in the last year. Even pre-Covid, after working together to learn what the client wants/needs, we can begin using their financial resources towards those goals – aka helping them LIVE THEIR PLAN.  While the past year may have shifted some of those goals (or delayed some of them – like travel, etc.), I believe that Covid-19 provided extra time, allowing many to focus on their most important goals – their WHY’s.

If you are interested in a financial planner and want to discover your “Why’s”, please reach out.  We would be happy to help you focus on narrowing those down and put those into action steps so that you can ultimately LIVE YOUR PLAN™.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Letter Of Last Instruction: A Helpful Factbook For Your Family

Contributed by: Josh Bitel, CFP®

A letter of last instruction is an often overlooked element of estate planning. While more popular documents, such as your Will, are critical in showing an overview of how your estate plan should be managed and distributed after you are gone, your letter of last instruction offers more detail on the specifics of your life. Among the important items in this letter are funeral preferences, login information for any electronic data your heirs may need access to, preferred care for pets and veterinarian contact information, and private messages to loved ones. These are just some of the items a letter of last instruction can provide that aren’t normally covered in other documents.

Here at The Center, we recently updated the letter of last instruction and personal record keeping templates we provide to clients. These can be intimidating at first glance, over 50 pages between the two, but committing just 20-30 minutes per week and chipping away at these documents until they are finished can go a long way in providing your family the information they will need to meet your wishes after death.

These documents are important to share with your financial planner as well, as part of your team, we can assist in working with your heirs to carry out your wishes when you are gone. Starting the conversation around these topics can be tricky, but they are important. Contact us at The Center if you like some assistance in this area.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

A Better Way To Pass Down Wealth To The Next Generation

Contributed by: Kali Hassinger, CFP®, CDFA®

You may have heard the saying, “Shirtsleeves to shirtsleeves in three generations.”  In a family, it refers to the phenomenon of a generation building wealth, passing it down to the second generation, but going broke by the third. Whether you are passing down investment assets or a family business, many parents have the hope that their money will enrich the lives of their children, grandchildren, and future generations for years to come. However, successful transitions do not just happen when assets are distributed.  Like most challenges in life, transitions require planning, communication, and coordination.

When planning for generational wealth transfers, opening the lines of communication is often the first and most difficult hurdle to overcome. Parents may be reluctant to share information on wealth and money for many different reasons. Our society as a whole often treats money as a taboo subject that is rarely discussed in personal terms. Other concerns could be stifling an heir’s initiative or the threat of a child’s future divorce. Simply avoiding these conversations, however, can lead to unintended confusion, irresponsibility, or resentment.

Family meetings devoted to discussing wealth can help heirs better understand their parents’ plan and any possible role they may play in the future. Family meetings also give participants the opportunity to express their views, accept responsibility, or acknowledge where they may need additional help in the future. There are many ways these meetings can be conducted, but they all center on the same objectives of trust, communication, and understanding.

A meeting with the family’s advisors, financial planner, attorney, and CPA should take place at some point as well. This will help the family to gain both comfort with the advisors and a greater understanding of the level of assets in question. With the passing of the SECURE Act eliminating the stretch IRA in many situations, retirement assets that are transitioning to the next generation may require more detailed tax strategies. The Estate tax limit has also fluctuated drastically throughout the last few decades, and that will most likely be the case going forward.  It’s important that those who will ultimately gain control of assets understand why plans were put into place and how they will function going forward. While no amount of planning can ultimately guarantee success, when the lines of communication are open between owners, heirs, and advisors, a family is able to develop the best strategy for all involved.

Successful family meetings are intended to engage family members, not be a set of rules handed from one generation to the next. Healthy communication builds trust, and trust builds understanding. We often encourage clients to involve children in their Annual Review meetings when they're comfortable. If full disclosure of all information seems too invasive initially, have a conversation with your planner prior to the meeting. We are happy to tailor the meeting as necessary and can review only the portions of your plan that you are comfortable sharing!

Helping You Set Your Financial Goals For The New Year!

Contributed by: Kali Hassinger, CFP®, CDFA®

New beginnings provide the opportunity to reflect.  What choices or experiences got you to where you are today, and where do you want to go from here?  Whether you’re motivated by the New Year or adjusting your course due to circumstances outside of your control, goals provide the opportunity to set your intentions and determine an action plan.

Budgeting, saving, retirement, paying off debt, and investing are all common, and often reoccurring, resolutions and goals. Why reoccurring?  Because, as is human nature, it is too easy to set a goal but lose focus along the way.  That is why it’s so important to set sustainable goals and find a way to remain accountable.

Working with an outside party, like a financial planner, can help you define these attainable goals and, most importantly, keep you accountable.  When we make commitments to ourselves and share them with others, we are more likely to follow through.

When goals are written down and incorporated in a holistic financial plan, it becomes easier to track progress and remain committed throughout the year.  The financial planning process, when executed correctly, integrates and coordinates your resources (assets and income) with your goals and objectives. As you go through this process, you will feel more organized, focused, and motivated. Your financial plan should incorporate the following (when applicable):

• Goal identification and clarification (you’re here now!)

• Developing your Net Worth Statement

• Preparing cash flow estimates

• Comprehensive investment management and ongoing monitoring of investments

• Financial independence and retirement income analysis

• Analysis of income tax returns and strategies designed to help decrease tax liability

• Review of risk management areas such as life insurance, disability, long term care, and property & casualty insurance

• College funding goals for children or grandchildren

• Estate and charitable giving strategies

As you reach one goal, new ones can emerge, and working with a financial planner can help you navigate life’s many financial stages. When you’re setting and working toward your objectives, don’t hesitate to reach out and share them with your trusted financial planner!  If you aren’t working with anyone yet, it’s never too late to start!  

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

7 Ways The Planning Doesn't Stop When You Retire

Contributed by: Sandra Adams, CFP®

Most materials related to retirement planning are focused on “preparing for retirement” to help clients set goals and retire successfully. Does that mean when goals are met, the planning is done? In my work, there is often a feeling that once clients cross the retirement “finish line” it should be smooth sailing from a planning standpoint. Unfortunately, nothing could be further from the truth. For many clients, post-retirement is likely when they’ll need the assistance of a planner the most!

Here are 7 planning post-retirement issues that might require the ongoing assistance of a financial advisor:

1. Retirement Income Planning 

An advisor can help you put together a year-by-year plan including income, resources, pensions, deferred compensation, Social Security, and investments.  The goal is to structure a tax-efficient strategy that is most beneficial to you.

2. Investments 

Once you are retired, a couple of things happen to make it even more important to keep an active eye on your investments: (1) You will probably begin withdrawing from investments and will likely need to manage the ongoing liquidity of at least a portion of your investment accounts and (2) You have an ongoing shorter time horizon and less tolerance for risk.

3. Social Security

It is likely that in pre-retirement planning you may have talked in generalities about what you might do with your Social Security and which strategy you might implement when you reached Social Security benefit age. However, once you reach retirement, the rubber hits the road and you need to navigate all of the available options and determine the best strategy for your situation – not necessarily something you want to do on your own without guidance.  

4. Health Insurance and Medicare

It’s a challenge for clients retiring before age 65 who have employers that don’t offer retiree healthcare. There’s often a significant expense surrounding retirement healthcare pre-Medicare.

For those under their employer healthcare, switching to Medicare is no small task – there are complications involved in “getting it right” by ensuring that clients are fully covered from an insurance standpoint once they get to retirement.  

5. Life Insurance and Long-Term Care Insurance

Life and long-term care insurances are items we hope to have in place pre-retirement. Especially since the cost and the ability to become insured becomes incredibly difficult the older one gets. However, maintaining these policies, understanding them, and having assistance once it comes time to draw on the benefits is quite another story.  

6. Estate and Multigenerational Planning

It makes sense for clients to manage their estate planning even after retirement and until the end of their lives. It’s the best way to ensure that their wealth is passed on to the next generation in the most efficient way possible. This is partly why we manage retirement income so close (account titling, beneficiaries, and estate documents). We also encourage families to document assets and have family conversations about their values and intentions for how they wish their wealth to be passed on. Many planners can help to structure and facilitate these kinds of conversations.

7. Planning for Aging

For many clients just entering retirement, one of their greatest challenges is how to help their now elderly parents manage the aging process. Like how to navigate the health care system? How to get the best care? How to determine the best place to live as they age? How best to pay for their care, especially if parents haven’t saved well enough for their retirement? How to avoid digging into your own retirement pockets to pay for your parents’ care? How to find the best resources in the community? And what questions to ask (since this is likely foreign territory for most)? 

Since humans are living longer lives, there will likely be an increased need and/or desire to plan. In an emergency, it could be difficult to make a decision uninformed. A planner can help you create a contingency plan for potential future health changes.

While it seems like the majority of materials, time, and energy of the financial planning world focuses on planning to reach retirement, there is so much still to do post-retirement. Perhaps as much OR MORE as there is pre-retirement. Having the help of a planner in post-retirement is likely something you might not realize you needed, but something you’ll certainly be glad you had.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

How to Finish Financially Strong in 2020

No one could have predicted what 2020 had to offer. The stock market saw wild swings that hadn’t occurred since the 2008 recession. Concerns over Iranian tensions and an oil war quickly took a backseat as Covid 19 spread across the world. Many other notable things happened this year, but let’s discuss how you can end the year financially strong.

Here are the top 8 tips from our financial advisors.

1. Consider rebalancing your portfolio.

The stock market’s major recovery since March may have left your portfolio overweight in some areas or underweight in others. Be sure that you’re taking on the correct amount of risk by rebalancing your long-term asset allocation.

2. Assess your financial goals.

Starting now, assess where you are with the financial goals you’ve set for yourself. Take the necessary steps to help meet your goals before year-end so that you can begin 2021 with a clean slate.

3. Know the estate tax rules.

For those with estates over $5M, be sure to review your potential estate tax exposure under both a Republican and Democrat administration.

4. Review your employer benefits package and retirement plan.

Open enrollment runs from Nov. 1 through Dec. 15. Review your open enrollment benefit package and your employer retirement plan. Don’t gloss over areas such as Group Life and Disability Elections as most Americans are vastly underinsured. Many 401k plans now offer an “auto increase” feature which can increase your contribution 1% each year until the contribution level hits 15%, for example.  

5. Take advantage of tax planning opportunities.

Such as tax-loss harvesting in after-tax investment accounts or Roth IRA conversions. Many folks have a lower income in 2020 which could present an opportunity to move some money from a traditional IRA to a Roth IRA while in a slightly lower tax bracket.

6. Boost your cash reserves.

It’s so important to have cash savings to cover unexpected expenses or income loss. Having a solid emergency fund can prevent you from having to sell investments in a down market or from taking on high-interest debt. Ideally, families with two working spouses should have enough cash to cover at least 3 months of expenses. While single income households should have cash to cover six months. Take the opportunity to review your budget and challenge yourself to find additional savings each week through year-end.

7. Contribute more to your retirement plan.

Increase your retirement account contributions for long-term savings, great tax benefits, and free money (aka an employer match).

Contributions you make to an employer pre-tax 401k or 403b are excluded from your taxable income and can grow tax-deferred. Roth account contributions are made after-tax but can grow tax-free.

If your employer plan and financial situation allow for it, you can accelerate your savings from now until the end of the year by setting your contribution level to a high percentage of your income.  Many employers allow you to contribute up to 100% of your pay.

8. Give to charity.

Is there a charity you would like to support? Make a charitable donation! Salvation Army and Toys for Tots are popular around this time.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the author and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 72.

What Are The Hidden Costs Of Buying A Home?

Contributed by: Robert Ingram, CFP®

Today’s historically low-interest rates can mean a more affordable mortgage payment. However, when buying a home within your budget, it’s important to consider the costs beyond the mortgage.

Let’s begin with the costs to purchase a home.

Even while carrying a mortgage, you will need to make a down payment. While there are low down payment loans, try to put down at least 20% of the purchase price. Otherwise, your loan may have a higher interest rate and you could face additional monthly costs such as mortgage insurance.

You will have closing costs, which can include things such as loan origination fees for processing and underwriting the mortgage, appraisal costs, inspection fee, title insurance, pre-paid property taxes, and first year’s homeowner’s insurance. Generally, you should expect to pay between 3-5% of the mortgage amount.

Now, you will have ongoing costs to live in your home.

Annual property taxes average about 1% of the home value nationwide, but the tax rates can vary widely depending on the city or town. Keep property taxes top of mind when you are looking at different communities.

Homeowner’s insurance is another annual cost that not only depends on the value of the home and the contents within it you are covering, but also on the state and local community. This cost generally ranges between $500-1,500 per year, sometimes more.

If your home is a condominium or a single family home, you should expect annual or monthly homeowner’s association fees that cover the care of common areas, the grounds, clubhouses, or pools. Depending on the number of amenities and of course the location, average fees range from $200-400 per month.

While you may be used to paying some utilities as a renter, the size of your new home could significantly increase your utility rates. Going from an 800 square-foot apartment to a 2,500 square-foot house could double or triple the costs to heat it, cool it, and to keep the lights on. Add your local area water and sewer fees and your utilities could easily reach $500 per month or more.

Going from renting to homeownership also means having to maintain the new home (both inside and out). Things can be regular ongoing maintenance like lawn care and landscaping, or larger projects like painting, roof repair, furnace, and appliance replacement. Consider the tools and equipment you would need to buy or the services you would hire to do the work.

Finally, there is another hidden cost that can put a dent in your budget, filling up the house.  A home with more rooms can mean more spaces that “need” furniture and other decorative touches. The costs of furnishings can be several thousands of dollars to tens of thousands of dollars. Without proper planning, it can be all too easy to rack up those credit card bills and have a mountain of debt as you move into your new home.

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Bob Ingram, and not necessarily those of Raymond James. Raymond James Financial Services, Inc. does not provide advice on mortgages. Raymond James and its financial advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified professional for your residential mortgage lending needs.

COVID-19 and Your Money: Know These 4 Easy Financial Tips

Contributed by: Sandra Adams, CFP®

The coronavirus pandemic has taken us by storm. The virus has been devastating both financially and psychologically for many across the world. It has changed the way we will likely live our lives forever and forced us to slow down and think about things differently. Here are the top financial lessons that COVID-19 has helped us to see a little clearer...lessons that may be worth holding onto even after the pandemic is behind us.

1. Stick To A Budget

   It is easy for budgeting to take a backseat when times are good. We may find ourselves spending money on unnecessary items because we aren’t paying attention. The pandemic forced many to take a hard look at their expenses due to loss of income and free time. Many cut back on those “extras” they didn’t need, didn’t want, or weren’t using. They found ways to be more frugal without impacting the quality of life. Also a major plus: family time at home didn’t cost anything.

2. Have An Emergency Reserve Fund

   As in any financial crisis or economic slowdown, having emergency reserves can save you if hours are cut or a job is lost. While you can collect unemployment, there is often a gap in it getting paid out. Having emergency reserves, enough to get you through several months’ worth of expenses can be a lifesaver in these situations. The truth is, the majority of the U.S. population does not have this. If you do not have an emergency reserve fund…make this your goal before the next crisis!

3. Update Your Estate Plan

   People of all ages suddenly realized it might not be too soon to make sure their estate planning documents are in order. Durable Powers of Attorney and Wills (and potentially a Trust if applicable) used to put off most younger folks until they started to have families or until they felt like they had accumulated “enough” in assets. The sudden threat of a virus that could take your life at any age suddenly made these documents more important. Even more so with anyone over the age of 18 needs to have their Durable Powers of Attorney as their parents are no longer able to make legal, financial, or medical decisions on their behalf. Many COVID-19 patients were taken to facilities alone and not allowed to have a family member accompany them.

4. Get Life Insurance

   The pandemic caused a surge of folks to wonder if they were sufficiently covered from a life insurance standpoint. Many were younger families who had not yet accumulated sufficient assets to support their spouses and children long-term. While less common, COVID-19 deaths have appeared in the young adult group. If those families did not have sufficient life insurance, their surviving members were left in a devastating financial situation. It’s extremely important to make sure one always has sufficient life insurance coverage until they have the time to accumulate assets to support their families later in life. More young folks need to get life insurance; middle-age clients need it if asset accumulation is behind schedule. 

While COVID-19 has greatly impacted our lives, we can certainly learn from it. Consider implementing these 4 lessons. We are certain to learn more lessons from COVID-19, but this is a good place to start!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

SECURE Act: Potential Trust Planning Pitfall

Contributed by: Josh Bitel, CFP®

Does the SECURE Act affect your retirement accounts?  If you’re not sure, let’s figure it out together.

Just about 2 months ago, the Senate passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act.  The legislation has many layers to it, some of which may impact your financial plan.

One major change is the elimination of ‘stretch’ distributions for non-spouse beneficiaries of retirement accounts such as IRAs. This means that retirement accounts inherited by children or any other non-spousal individuals at least 10 years younger than the deceased account owner must deplete the entire account no later than 10 years after the date of death. Prior to the SECURE Act, beneficiaries were able to ‘stretch’ out distributions over their lifetime, as long as they withdraw the minimum required amount from the account each year based on their age. This allowed for greater flexibility and control over the tax implications of these distributions.

What if your beneficiary is a trust?

Prior to this new law, a see-through trust was a sensible planning tool for retirement account holders, as it gives owners post-mortem control over how their assets are distributed to beneficiaries.  These trusts often contained language that allowed heirs to only distribute the minimum required amount each year as the IRS dictated.  However, now that stretch IRAs are no longer permitted, ‘required distributions’ are no longer in place until the 10th year after death, in which case the IRS requires the entire account to be emptied.  This could potentially create a major tax implication for inherited account holders.  All trusts are not created equally, so 2020 is a great year to get back in touch with your estate planning attorney to make sure your plan is bullet proof.

It is important to note that if you already have an IRA from which you have been taking stretch distributions from, you are grandfathered into using this provision, so no changes are needed.  Other exemptions from this 10-year distribution rule are spouses, individual beneficiaries less than 10 years younger than the account holder, and disabled or chronically ill beneficiaries.  Also exempt are 501(c)(3) charitable organizations and minor children who inherit accounts prior to age 18 or 21 (depending on the state) – once they reach that specified age, the 10-year rule will apply from that point, however.

Still uncertain if the SECURE Act impacts you?  Reach out to your financial advisor or contact us. We are happy to help.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

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Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.